Private pensions are often a large and valuable asset when financial settlements are negotiated as part of a divorce, but the majority of people don’t understand how and why pension funds are divided. To break through the confusion, Caroline Dresden, Legal Director in Lodders’ Family Law team explains all.
Pension sharing on divorce has existed in the UK for more than two decades, but accurate figures on the exact numbers of people obtaining Pension Sharing Orders are almost impossible to locate.
The way we live has changed significantly in the last 20 years; nowadays it is more likely than ever before that one or both parties in a divorce will each have a pension.
However, there is still gender disparity in the size and value of pension funds. There is still a gap; more women work part-time and work for lower pay than men, and yet, whilst women’s pension wealth is on average a quarter of the value of men’s pensions, it can still be a valuable asset.
It is always important to consider a pension share. Sometimes flexibility is required. If necessary, it is possible to take a pension share and give a charge on the family home, with an agreement that the property is sold when children reach adulthood, in order to ensure equality of liquid and illiquid capital.
Pension Advisory Group
The first Pensions Advisory Group Report provided useful insight and information. It revealed that:
· Most parties instruct their solicitors not to take pension provision into account.
· Parties seem to agree an informal “offset” between themselves. But £1 of pension is not the same as £1 of free cash.
· Husbands often want their pension to be ignored, but if the wife has no pension and ‘lives’ in her capital, her home will have to be sold, to provide for her old age.
The concern is that neither party understands the issue. They are content to offset, without considering the true value of the pension.
Do not ignore a pension because it is complicated. It may not be in the forefront of your mind now, but by the time you retire, it will be to your advantage to have planned ahead.
It is sage to locate details of your pension as early as possible, but remember when markets are volatile, it may be necessary to update pension valuations more than once a year.
Furthermore, it is important to always get a professional, comprehensive pensions report from a knowledgeable expert.
For bespoke advice and an impartial list of the best pension experts and advisers on divorce, please contact Lodders’ Family Law team on 0121 200 0890.
Caroline Dresden specialises in high-net-worth matrimonial financial cases, especially those involving business assets. She is a fully trained collaborative lawyer and a member of Resolution, a community of family law professionals who work with families and individuals to resolve issues in a constructive way. Lodders Family Law team is consistently recognised for its experience and expertise across the spectrum of family law, placed Band 1 in Chambers & Partners and Tier 1 by the Legal 500.
Lodders is a premier law firm in Stratford upon Avon, Cheltenham, Henley in Arden, and Birmingham. Founded 235 years ago, the firm offers expert legal advice across a range of legal services including private client, business law, real estate and family law.
For more information, visit: www.lodders.co.uk
This is a submitted article.